Wall Street ignored the new unemployment rate of 7.6 percent and rallied for the second successive day Friday as it looked ahead to Senate passage of the Obama administration’s economic stimulus package and a second bank bailout.
All of the major indexes rose more than 2.5 percent, and the tech-focused Nasdaq Composite Index erased all of its losses for the year.
At the close, the Dow Jones Industrial Average shot up 217.52, or 2.70 percent, to 8,280.59. The Nasdaq soared 45.47, or 2.91 percent, to 1591.72. The broader Standard & Poor’s 500 surged 22.75, or 2.69 percent, to 868.60.
In cold calculation despite the jobless numbers, bank stocks rose between 11 percent and 23 percent as Wall Street rallied strongly in anticipation of Congress passing a stimulus plan and of the comprehensive bailout package, which Treasury Secretary Tim Geithner was expected to unveil Monday.
Investors worldwide shared the same view, with markets in Europe and Asia moving higher on hopes that the $900-billion-plus plan will spur a turnaround in the U.S. economy - even though the addition of 598,000 people to the jobless rolls in January marked the worst unemployment numbers since the end of 1974, when the Arab oil embargo hit home solidly after the 1973 October war.
Financials, insurance companies, retailers, homebuilders and high-tech firms led the rally, with Bank of America posting a 23 percent gain for the day, JP Morgan rising 13 percent and Citigroup 11 percent.
Harry Rady of Rady Asset Management LLC of La Jolla, Calif., told CNBC that the upward surge of the markets in the past two days marked a “bear market rally,” not a Wall Street turnaround.
Kenneth Lewis, chairman and CEO of the severely troubled Bank of America, told CNBC that his bank will not need further federal bailout money. It already has received a $35 billion injection plus another $118 billion in guarantees against bad assets.
“Categorically, I can say no,” he replied when asked whether his bank will need another bailout.
Ken Goldstein, an economist at the Conference Board, the New York outfit that measures the leading economic indicators, predicted that January will mark the worst unemployment of the recession and that the intensity of monthly job losses will ease after their rapid rise since August.
“The surprise has been how quickly the intensity has built up,” he told The Washington Times. “We’re close to or past the intensity. January is the worst month, but February and March will be better, but not much better.” Mr. Goldstein, who described January’s jobless number as “bad and ugly,” forecast unemployment in the range of 300,000 to 400,000 people this month and again next month, dropping to about 200,000 in April and again in May. The recession, he said, could continue until the autumn.